Growing school districts consider higher developer fees

As construction resumes in subdivisions where activity froze during the recession, school districts are struggling to find enough money to build new campuses because state matching funds are nearly exhausted and no new bonds are on the immediate horizon.

To solve that problem, districts are eyeing higher developer fees and preparing to invoke a law allowing them to double those charges if the state runs out of construction funds. That could increase new home costs by thousands of dollars.

“What we are dealing with on the ground level is the parents and the communities that need those schools are calling upon us frequently because they want their schools now,” said Rob Pierce, Elk Grove Unified associate superintendent of facilities and planning. “We simply don’t have the resources or revenue to build them. It’s a very frustrating position that we find ourselves in.”

Folsom Cordova Unified and Elk Grove Unified are bracing for dramatic growth in the coming years, with plenty of land available for housing.

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Elk Grove expects it will need $154.2 million to acquire property and build schools to accommodate the 4,901 new students who will come in the next five years. It expects 6,226 new homes during that time and about 90,000 new homes in the next 20 years, according to district reports. The school district is already 7,441 students over capacity, according to its facilities and needs analysis.

Folsom Cordova officials project an additional 3,329 houses within its boundaries in the next five years, generating 1,918 new students, according to a district needs analysis.

Both districts’ trustees have voted to invoke the Leroy F. Greene School Facilities Act of 1998, which allows them to double residential developer fees to cover the full cost of school facilities if state funds run out.

That could happen soon. Of the $10.4 billion authorized by Proposition 1D and passed by voters in 2006, only $11.5 million is left for new school construction and $4.4 million for facility modernization, according to the state Department of General Services. Another $6.3 million is available for construction and $100,000 for modernization from Propositions 55 and 47, which were passed in 2004 and 2002 respectively.

About $374 million worth of school construction projects – new and modernization – are still unfunded, said Ken Hunt, spokesman for the state Department of General Services in an email.

Though his district has voted to invoke the state law to double developer fees, Pierce doesn’t believe that will have to happen because state lawmakers oppose that mechanism.

Dave Cogdill, a former state lawmaker from Modesto who leads the California Building Industry Association, said doubling developer fees won’t work in many California housing markets, including the Sacramento region. “It would probably result in a number of projects becoming no longer feasible.”

The BIA is part of a coalition of school officials and home builders that have launched an initiative drive to qualify a $9 billion school bond for the November 2016 ballot.

“We have a crying need to move forward with another bond,” Cogdill said. “We tried very hard last year to get it through the Legislature and would have done that if the governor weren’t adamantly against it.”

He said the group should have the signatures needed by July to put the bond on the ballot.

In the meantime, local school trustees are raising their developer fees in small increments.

Folsom Cordova trustees voted last month to hike residential developer fees from $5.24 to $5.27 per square foot in Rancho Cordova, known as School Facilities Improvement District 1, and from $6.11 to $6.16 per square foot in Folsom, known as School Facilities Improvement District 2.

Elk Grove Unified is preparing to do the same. If trustees approve the plan Tuesday, the district will bump its residential developer fees up by 4 cents to $4.91 a square foot. That would raise the school impact fee for the construction of a 2,200-square-foot home in Elk Grove Unified from $10,714 to $10,802.

San Juan Unified also recently hiked its developer fees from $2.14 per square foot to the maximum allowed in a slow-growth district: $3.36 per square foot. The district estimates it needs $2.4 billion to upgrade and modernize its facilities.

The fees are levied against new residential construction and additions over 500 square feet.

Although the combination of developer fees and state matching funds are supposed to entirely fund land acquisition, site development and school construction, it usually doesn’t cover all the costs, Pierce said.

“The state only builds certain things of a certain size,” he said. “The state doesn’t build stadiums or swimming pools. They just pay what they pay and you make up the difference.”

School districts also may raise developer fees again in the next few months. A state delay in adjusting the base fee, a process undertaken every other year, forced many districts to pass new developer fees without the new numbers in order to make annual deadlines, Pierce said. If fees aren’t recalculated within a year, they expire, he said.

In the meantime, building continues. Elk Grove Unified has nearly completed Marion Mix Elementary School, which opens in the fall. Mix was built with state matching funds and developer fees.

District officials are also moving forward with the replacement of aging C.W. Dillard Elementary in Wilton without state matching funds. But it’s running out of money to build its next two projects: elementary schools in the Anatolia community of Rancho Cordova and an elementary school in the Laguna Ridge community of Elk Grove.

Without state funding, the district can build only one of them, Pierce said.

Tier I allows school districts to charge developers up to $3.36 per square foot for residential construction. Districts can assess fees above $3.36 in Tier II if they conduct facilities-needs analysis and meet other criteria, including projected enrollment growth. Tier III allows districts to double developer fees if the state runs out of money to pay its share of school facilities.